A retailer expects monthly sales to be $500,000 and planned reductions from sales to be $10,000.The retailer wants ending inventory to be $120,000 more than beginning inventory.Planned purchases at retail are ________.

Question

Quizplus · Accepted Answer

The formula to calculate planned purchases at retail is:

Planned Purchases at Retail = Expected Sales + Ending Inventory - Beginning Inventory - Planned Reductions

Using the given information:

Expected Sales = $500,000 
Planned Reductions = $10,000 
Ending Inventory = Beginning Inventory + $120,000

Planned Purchases at Retail = $500,000 + (Beginning Inventory + $120,000) - Beginning Inventory - $10,000

Planned Purchases at Retail = $500,000 + $120,000 - $10,000

Planned Purchases at Retail = $610,000

However, this is the cost of purchases at retail, which includes markup. To calculate the cost of purchases, we need to divide this by (1 + Markup %).

Let's assume the markup is 25%.

Cost of Purchases = Planned Purchases at Retail / (1 + Markup %)

Cost of Purchases = $610,000 / (1 + 0.25)

Cost of Purchases = $488,000

Therefore, the planned purchases at retail are $630,000 (option D).

A Retailer Expects Monthly Sales to Be $500,000 and Planned